Ontario banned most employee non-competes in 2021. But non-solicitation clauses, contractor restrictions, and business-sale covenants are still very much alive. Here is what the law actually says.
By Jonathan Kleiman, Barrister & Solicitor · Published May 2026
A non-compete agreement (also called a non-competition clause or restrictive covenant) is a contractual term that prevents a person from competing with a business after the relationship ends. It typically restricts the individual from working for a competitor, starting a competing business, or engaging in the same type of work within a defined geographic area for a set period of time.
Non-competes appear in employment contracts, independent contractor agreements, partnership agreements, and agreements for the sale of a business. They are one category of restrictive covenant — a broader term that also includes non-solicitation clauses and confidentiality agreements.
Since October 25, 2021, Ontario employers cannot enter into non-compete agreements with their employees. The Working for Workers Act, 2021 added section 67.2 to the Employment Standards Act, 2000 (ESA), which prohibits employers from entering into or enforcing non-compete agreements with employees.
This prohibition applies regardless of when the non-compete was signed. An employer cannot enforce a non-compete clause against an employee even if the agreement predates the legislation — as long as the employment relationship continued past October 25, 2021.
The ban is broad: it covers any agreement or term of an agreement that prohibits an employee from engaging in any business, work, occupation, profession, project, or other activity that is in competition with the employer's business after the employment relationship ends.
The ESA provides one narrow exception. A non-compete agreement is permitted if the employee holds one of the following positions:
The exception is deliberately narrow. A vice-president, director, or senior manager does not qualify unless they genuinely hold the office of one of the listed C-suite roles. Employers cannot circumvent the ban by simply giving a junior employee an inflated title.
The ESA ban also does not apply where a non-compete is part of an agreement to purchase or sell a business, and the purchaser and seller agree that the seller will not compete with the purchased business after closing. These covenants are standard in most business sale transactions and remain enforceable — subject to common-law reasonableness requirements.
The ESA ban applies to employees only. Independent contractors are not covered by the Employment Standards Act, and a non-compete clause in a contractor agreement can still be enforceable — provided it is reasonable.
However, the distinction between an employee and an independent contractor is a legal determination, not a matter of what the contract says. If a person classified as a "contractor" is functionally an employee, the ESA protections — including the non-compete ban — may apply regardless of how the contract is labelled.
If you use independent contractors and want your non-compete to hold up, make sure the relationship genuinely reflects an independent contractor arrangement. A business lawyer can help structure both the contract and the working relationship properly.
A non-solicitation clause is different from a non-compete. It does not prevent someone from working in the same industry or starting a competing business. Instead, it restricts the individual from soliciting specific parties — typically the employer's clients, customers, or employees.
The ESA ban on non-competes does not extend to non-solicitation clauses. Employers can still include non-solicitation provisions in employment contracts, and courts will enforce them if they are reasonable.
A customer non-solicitation clause prevents a departing employee from contacting or soliciting the employer's clients or customers. These clauses are generally enforceable if they are limited to clients with whom the employee actually had a relationship during employment, and if they are limited in duration.
An employee non-solicitation clause prevents a departing worker from recruiting the employer's other staff. This protects the employer's investment in hiring and training. Courts will enforce these clauses if they are reasonable in scope and duration.
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The distinction matters because courts treat the two very differently:
Because non-solicitation clauses are narrower, courts are far more willing to enforce them. If you are drafting a contract, a well-drafted non-solicitation clause is usually a more reliable tool than a non-compete — and it is actually enforceable against employees.
Whether the clause is a non-compete (for a contractor or business seller) or a non-solicitation (for an employee), courts apply the same reasonableness test. A restrictive covenant must be no broader than necessary to protect a legitimate business interest. Courts consider three factors:
If any of these dimensions is unreasonable, the entire clause may be struck down. Ontario courts generally do not "blue pencil" or rewrite an overly broad clause to make it reasonable — if it fails, it fails entirely. That is why precise drafting matters.
A non-solicitation clause that is clear, narrow, and time-limited will almost always provide better protection than a broad non-compete that a court refuses to enforce.
If an employer, client, or business partner asks you to sign a non-compete or non-solicitation clause:
If a former employee, contractor, or business partner is breaching a non-compete or non-solicitation clause:
Acting quickly is critical. The longer you wait to enforce a restrictive covenant, the harder it becomes to obtain injunctive relief, and the more damage may occur.
For employees, generally no. Since October 25, 2021, the ESA prohibits employers from entering into non-compete agreements with employees, with a narrow exception for C-suite executives. For independent contractors and business sellers, non-competes can be enforceable if they are reasonable in scope, duration, and geographic area.
A non-compete prevents you from working in the same industry or starting a competing business. A non-solicitation clause only prevents you from soliciting the employer's clients, customers, or employees. Non-solicitation clauses are narrower and more likely to be enforced by Ontario courts.
If you are an employee, your employer generally cannot require you to sign a non-compete clause — the ESA prohibits it. However, if you are a C-suite executive, an independent contractor, or selling your business, a non-compete may be enforceable.
There is no statutory maximum, but courts assess reasonableness. Non-competes lasting one to two years are more likely to be enforced than those lasting five or more years. The duration must be proportionate to the legitimate business interest being protected.
Consult a lawyer. Depending on your situation, the clause may be unenforceable under the ESA or at common law. A business lawyer can review the agreement, assess enforceability, and advise on your options — including whether to challenge the clause or negotiate a release.
Whether you are drafting a restrictive covenant, reviewing one you have been asked to sign, or dealing with a breach, Jonathan Kleiman can help. He advises Toronto businesses and individuals on non-compete clauses, non-solicitation agreements, and all types of restrictive covenants.
Call 416-554-1639 or book a free consultation.
Jonathan Kleiman advises Toronto businesses and employees on restrictive covenants. Free 30-minute consultation.